China’s Inflation Weakens Again in May as Trade Pressures Persist
China’s consumer price index (CPI) fell for the fourth consecutive month in May, while producer prices saw their steepest drop in nearly two years, reflecting the ongoing economic strain from the prolonged trade dispute with the United States.
Official data released Monday showed annual CPI declined by 0.1% in May, matching both expectations and the previous month’s drop. On a monthly basis, CPI decreased by 0.2%, reversing a 0.1% increase recorded in April.
The figures underscore continued weakness in domestic consumption—an area Beijing has struggled to revive despite repeated efforts over the past two years.
These inflation readings arrived just ahead of a high-stakes round of U.S.-China trade talks set to take place in London later Monday. The talks follow a diplomatic breakthrough reached in Geneva last month. A potential agreement could see Washington roll back tariffs on Chinese goods, a move that would ease one of the major headwinds facing China’s economy in recent months.
Attention is now turning to possible new fiscal stimulus measures in China, with policymakers expected to prioritize steps to boost household consumption.
The sharpest impact of slowing demand was seen in producer prices. The producer price index (PPI) fell 3.3% year-on-year in May—marking the biggest monthly drop in 22 months. This exceeded expectations for a 3.1% decline and followed a 2.7% decrease in April.
China’s manufacturers faced declining foreign demand alongside softer domestic consumption, as elevated U.S. tariffs continued to weigh heavily on sentiment and profitability.
May’s inflation data remained muted despite the anticipated bump in consumer activity from the Labour Day holiday week, signaling that holiday spending was not strong enough to offset broader economic headwinds.
